It’s a small shot in the arm, but it could mean big money for pharmaceutical companies around the world. With flu season upon us and swine flu threatening to reach pandemic proportions, Big Pharma is scrambling to join the vaccine game.

(Editor's Note: Also read our Viral Threats package.)

A slew of pharmaceutical companies have scooped up smaller biotechs and vaccine makers in an effort to bolster their pathetic showing in the arena this year.

Pfizer (PFE) slapped down a hefty $68 billion for Wyeth to secure what many industry insiders consider to be the most valuable research team developing vaccines. The acquisition, which was completed in October, gives Pfizer access to the top-selling pneumococcal vaccine for children, Prevnar, among others.

Abbott Laboratories (ABT) announced in September that it plans to drop a whopping $6.6 billion for the Belgium-based Solvay to get its hand on its flu vaccine, which brought in $201 million in sales in 2008. The deal has yet to close.

Johnson & Johnson (JNJ) is also jumping into the vaccination craze with the purchase of an 18% stake in Crucell for $444 million. The Dutch company entered into a deal with Johnson & Johnson concerning its flu vaccine.

Not all of Big Pharma is buying its way into the inoculation industry: Merck (MRK), Novartis (NVS), and GalxoSmithKline (GSK) are already major players in vaccines.

Glaxo got approval from the US Food and Drug Administration on Wednesday to make 7.6 million doses of its unadjuvanted H1N1 vaccine by the end of the year -- only a small portion of the doses that will be needed. The British company makes an adjuvanted version (a vaccine with add-ins that boost the immune response) of the vaccine in Europe.

Merck got approval for its human papillomavirus vaccine in 2006. The vaccine was originally produced to prevent the infection that causes cervical cancer in girls and young women. It was approved in October by the FDA for the treatment of genital warts caused by HPV in boys and young men.

The pharma giant also produces vaccines for measles, mumps, rubella, as well as hepatitis A and B. Merck saw revenues of $1.2 billion for its vaccines and infectious disease drugs during the third quarter of 2009.  So is the vaccine craze a shot in the dark? Hardly.

Big Pharma is facing a major patent cliff through 2013 as many of their major revenue-driving drugs lose out to generic competition, including Pfizer’s Lipitor and Sanofi-Aventis (SNY) and Bristol-Myers Squibb’s (BMY) Plavix -- two of the top-selling drugs in the world.

Vaccines are unique because they aren’t often targets for the generic drug makers. Yet, vaccines are generally easier to get through regulatory channels than most other drugs.

While the multitudes of flu strains that have popped up in recent years have added to the pharmaceutical industry’s interest in the field, it's the ever-present demand and the idea of prevention that has the sector abuzz.

"As more diseases become amenable to fixing or prevention through vaccine, the market expands," says Les Funtleyder, Miller Tabak analyst and author of Healthcare Investing: Profiting from the New World of Pharma, Biotech and Health-Care Services. He adds that the industry is finding new diseases all the time that can be vaccinated against, such as HPV or meningitis.

The ever-growing market only adds to a constant demand that's already present for vaccines.

"Once a vaccine is put on the recommended list for people to get, it will always provide a certain amount of demand," says Funtleyder.

Yet, vaccines aren’t the cure for what ails the pharmaceutical industry. Like the production of any other drug, producing vaccines has its risks as well.

Regulators and scientists are still questioning the risk of adjuvants in vaccines. Some vaccines have even developed an image problem; many parents still believe that some vaccines that include the ingredient thimerosal can cause autism, despite a swath of scientific evidence to the contrary.

But the amount of time that vaccines take to produce is the biggest impediment to a pharma’s top line and also the major problem the US has faced with supplying enough of the H1N1 vaccine to the masses.

©2008 Minyanville Publishing and Multimedia, LLC. All Rights Reserved.

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